Sunday, March 31, 2013

This week’s GOP autopsy report, commissioned by RNC Chairman Reince Priebus, is a great start in the much-needed task of rebranding the Republican Party. As the chairman acknowledged, “the way we communicate our principles isn’t resonating widely enough” and “we have to be more inclusive.” The report contains 219 recommendations to “connect people to our principles.” To achieve that goal, the party will need a strategic vision of how voters think about politics, which is something that the report lacks. For that, the GOP can learn a lot from another American passion: baseball.

This year, about 75 million Americans will go to the baseball stadium to watch a ballgame, about the same number as those who will vote in next year’s election. We rarely think about why someone becomes a baseball fan, or why they root for a certain team. Nor do we usually think about why someone chooses to vote for a certain political party. But it’s actually a very useful exercise.

When it comes to baseball, fan loyalty has almost nothing to do with the brain, and almost everything to do with the heart. In all of history, there’s never been a baseball fan who rooted for his team because it had the lowest ticket prices, or because it had the most taxpayer-friendly stadium deal, or because its players did the most community service. For the vast majority of Americans, rooting for a baseball team — not to mention, voting for a political party — isn’t really a rational choice; it’s more of a statement of personal identity — a statement telling the world, “This is who I am.” And for most people, defining “who I am” starts with family and community, before branching out into areas like race, age, gender, and class.

Family is pretty straightforward. If your mom and dad are Yankee fans, you’re almost certainly a Yankee fan. The same is true in politics. If your mom and dad are Republicans, you’re almost certainly a Republican.

Community is also pretty straightforward. If you grew up in, say, Philadelphia, chances are pretty great you’re a Phillies fan. Likewise, someone who grew up in Republican territory like, say, suburban Dallas or rural Indiana is much more likely to become a Republican than a nearly identical person from Seattle or Santa Fe.

Cities with more than one baseball team, like New York or Chicago, show revealing breakdowns by race and gender. The racial split in Chicago between Cubs fans on the North Side and White Sox fans on the South Side is well-documented. In New York, there’s an intriguing gender gap between Mets and Yankee fans, with women gravitating a lot more to the Yanks. While there’s a few theories out there trying to explain that, one obvious answer leaps out: Yankees heartthrob Derek Jeter.

In sports, as in politics, people’s convictions can’t be conveniently reduced to who their parents are or what they look like. But those things are an important foundation, upon which more rational sentiments come into being. Once you’re attached to your team on an emotional level — seeing them as a personal reflection of who you are and what you care about most — a rational exterior comes into being through phrases like “the Red Sox are the best team because they have the most heart” or “the Republicans are the best party because they know how to create jobs.”

Reader Comments and Retorts

Statements posted here are those of our readers and do not represent the BaseballThinkFactory. Names are provided by the poster and are not verified. We ask that posters follow our submission policy. Please report any inappropriate comments.

Utter nonsense. People know how much money they have coming in and how much they have going out, and whether they have a stable job, and whether they can expect an increase in earnings, and how much they have in savings, and how difficult it might be to find another job if they lose the one they have, etc. They also understand the concept of an interest rate that is adjustable, and whether they are sitting on a house of cards or whether they will be able to make the payments even with a significant increase to the interest rate. And you know what? These decisions aren't made Alone, but are made with the help of advisors -- accountants, relatives, friends -- who can crunch a few numbers.

BS, and I represent banks.

People know how much money they have coming in and how much they have going out,

People should know this, I know my situation, but not everyone does

and whether they have a stable job

#### happens

They also understand the concept of an interest rate that is adjustable,

No, a thousand times no, not only that but I've ruin into freaking JUDGES* who do not understand, by saying this you are proving that you are clueless

And you know what? These decisions aren't made Alone, but are made with the help of advisors -- accountants, relatives, friends -- who can crunch a few numbers

You'd be surprised (you and you alone)about how many people make these decisions with the help of people as clueless as themselves or with the "help" of someone (mortgage broker) who has a vested interest in seeing the loan close no matter what. (There's been a bill that periodically gets bandied about in Albany, tat basically states that Mortgage Brokers have a fiduciary duty to their clients, never passes...)

*Hell is representing a bank in front of a judge who believes in literally the opposite of everything Ray put down in that post.

"ARM."
"What's an ARM?"
"Adjustable-rate mortgage."
"Oh. That means that the interest rate could change?"
"Yep."
"It could go up?"
"Yep. So you need to be careful. Here's how it works...."

real life conversation 1:
"What's an ARM?"
"oh, don't worry about that, it's just some program acronym"
"ok"

real life conversation 2:
"What's an ARM?"
"Adjustable-rate mortgage."
"Oh. What does that mean?"
"The rate can change, but it won't for 2 years, and the last few of these I've seen the rate actually went down, and when that happens you can either pay less per month, or the same amount, but pay off the mortgage early, and if you can pay off your mortgage early you can retire early"

real life conversation 3:
"What's an ARM?"
"Adjustable-rate mortgage."
"It could go up?"
"Yep, it can also go down, it's fixed for 2 years, then they give notice of a rate change, if it's going up you can refinance to a fixed mortgage. You can get a fixed one now, but the your payments are going to be $1750 rather than $1625.

You really have no clue do you, you live in a libertarian fantasy world where everyone is educated ad understands all the concepts that you do.

What has changed and is noticeable is definitely the pre-approval process. What you must produce as a lender for the underwriter is much more stringent.

Thank god, but the problem is that we never learn, 10-15-20 years from now some lenders are going to loosen up again, and if they make money (and almost everyone makes money in a rising market, even fools- especially fools), and when some fool makes money doing something stupid they are going to be copied.

Professionals speak in their profession's jargon for a reason. Only they really know what it means, and what it means of course is what it means to them. A good judge (including an administrative judge) will hold the party that confects the contract to have the legal burdens. In fact, that's a rule. Yet, there's something in us that likes to take someone who is at our mercy by the nape and grind his face in the dirt.

nd let's not forget the party of the greatest culpability who caused all of this: government.

Yes by failing in its oversight duties.

You know what State Government did a good job on this score?
Texas
Do you know why? Because they tightly regulated the home mortgage market
Lenders could not lend more than 80% of a home's value, based upon an independent state licensed appraisal (they couldn't even use in-house appraisers)
ARMs were not allowed, "teaser rates and neg-Am" loans were not allowed
as a result no RE bubble and no crash, but they did it by severely limiting the right to contract so beloved by libertarians

And by the way, those rules were in place for decades, Rick Perry tired to do away with them but fortunately for Texas home owners he failed.

OTOH Texas is the easiest state to complete a foreclosure from the bank's POV,

"These decisions aren't made Alone, but are made with the help of advisors -- accountants, relatives, friends -- who can crunch a few numbers.

And:

"And again, people signing major financial contracts should always seek the counsel of accountants, lawyers, or people who can crunch basic numbers (are you claiming that entire swathes of the public don't have a friend or relative who can do the math for them?)"

It's basically just. "Hey, sis! I'm thinking of buying a home! Here are my basic numbers! Do you think it might work for me? Thanks!"

(Where "Sis" is not Teen Mom who is busy making sex tapes but is actually someone who knows something about something. Again, the fiction here is that low-income people know nobody who knows anything about this stuff.)

Also, I think the scale of the fraud was grossly underestimated by the participants in the market. (And given the incentives for speculators to submit fraudulent applications, I don't blame them for doing so - they're pawns in the broken system just like the bankers are).

a long rising market can hide a lot of misdeeds, there were staggering number of people (all over the country) who were enagng in scams and getting away with it far longer than they would in a "normal" market.

You would have something as simple as this:

Take out 200k mortgage on a house (owned by ABC LLC)
Use that 200K to make downpayments on other properties which are then bought by strawbuyers who take out additional mortgage loans, and to make monthly payments
Months go buy, cash flow is tight, but the market is still going up that elevator shaft, you refinance that first 200K mortgage with a 250K mortgage, that frees up 50K, which can be used to make a couple monthly payments on all those other properties you bought, as you are flipping them...

Of course if the market hiccups, it all comes crumbling down.
The banks have $10 million in loans outstanding on properties worth, maybe $8 million, after you account for down payments, and monthly debt service payments there will be somewhere a couple hundred thou or a few million "missing"

Hey, sis! I'm thinking of buying a home! Here are my basic numbers! Do you think it might work for me? Thanks!

Sure, bro! I just refinanced my 2 year ARM into a new one and took out some cash to boot since my home value increased. Let me put you in touch with my mortgage broker. He is great and will take care of you.

I looked into buying a house during the bubble in an area where the bubble was greatly expanding due Northern Chicagoans fleeing Illinois and I can tell you from first hand experience that a lot of people involved in the home buying process were crooked, ignorant, or just plain stupid. Not everybody and not everybody in each step were this way but plenty enough of them were that it was obvious it was all going to come crashing down at some point.

Every Tom, Dick, and Harry had a real estate license, every bartender or soccer mom had a secondary job working for a mortgage lender, and everyone thought they could flip houses.

I remember looking at a home that was owned by something like 3 20 year olds who thought they could buy a home that needed to work, fix it up, and then flip it in a few months. When I looked at it there were a few holes in the walls and the kids were sitting on the couch in their pajamas playing on their playstation and asking a boatload for a crappy house.

To this day I still think I was fortunate that I was initially hooked up with a pretty honest mortgage lender who was pretty responsible and wasn't about to give me boatloads of cash simply to get their cut. That and I simply refused to do an ARM or pay the prices people were asking.

OTOH Texas is the easiest state to complete a foreclosure from the bank's POV

Well, the HELOC process in TX is seriously screwed up and has a quasi-judicial foreclosure proceeding involved. Because of that, there are quite a number of traditional non-judicial states where the foreclosure is at least as streamlined if not more so such as Georgia, Michigan, Minnesota, Alabama, and a few others that haven't fallen into the HOBOR trap.

On the flipside my Aunt and Uncle just had to short sell their home they've had for over 20 years because they constantly borrowed against the rising value of their home and never built up any equity in the home. The economy crashed, my Uncle got laid off, and they couldn't make the payments nor borrow any money.

What did they spend all that money on? Vacations, toys, and "stuff".

People are stupid. Were they a bunch of uneducated hicks? Nope. College grad and worked for IBM for decades.

Many mortgagees/pooling and servicing trustees require that if a loan defaults that the servicer bring the foreclosure suit in the servicer's name, but you can't do that in some Departments here, the f/c action must be brought in the name of the Mortgagee of Record (which is usually MERS)

but MERS has no standing because they are not really an interested party to the f/c action...

so basically:
1: suit commenced in name of servicer, it gets tossed (and no you can't move to substitute plaintiffs, the plaintiff has to be in title when suit is commenced)
2: the Pooling Agreement Trustee relents and says fine, use us as plaintff "as trustee..."- case gets bounced because mortgagee of records is MERS as nominee for Fremont
3: OK, lets get and assignment of mortgage, record it, and then use in the assignee's name... ummm, Fremont went under 4 years ago, who can sign the damn assignment... ok let's look in the pooling and servicing agreement (1200 pages long)... it says nothing about getting a POA from Fremont to execute assignments in their name, what do you mean it doesn't, the new pooling agreements do, yes the new ones do, the old ones didn't, 1200 freaking pages, 2500 provsions, and no one thought of that at the time...

Ray, not to pile on, but you are seriously, seriously overestimating the intelligence of the average American.

Anyone smart enough to cross the street on a green light is smart enough to understand that an ARM might go up and to ask someone who understands -- not the lender (WTF?) -- whether the mortgage makes sense given that person's particular finances/employment situation.

All the ins and outs of the contract and of ARMS, all the "fine print," need not be understood. Just the basic concept. "Here are my finances; does the mortgage make sense?"

And if someone doesn't ask that basic question to someone who can advise them, I have no sympathy for them, and I don't want to be part of the taxpayer brigade that picks up their loan -- I don't care how many Deceptive Ads were thrown their way.

(And to Andy: as a lawyer I would absolutely never bury anything important in the "fine print." Yes, I understand that this is done in various legal settings. It doesn't always work out too well for the party trying to bury something. But the "A" for "adjustable" is right there in the freaking acronym.)

(For what it's worth, I got an ARM during the bubble and it worked out great for me.)

Because ARMs are linked to some index rate and all index rates are in the toilet. If you got an ARM during the "bubble" your current rate is either the same or lower than it was.

In fact, the F/C crisis of the past few years is unrelated to ARMs for that reason
There was a relatively minor F/C surge late 90s that was ARM related (index rates go up, ARM foreclosures go up, period.)

Guess what, when prime goes up (and one of these days it will) we are going to have an ARM foreclosure crisis, guaranteed.

You really have no clue do you, you live in a libertarian fantasy world where everyone is educated ad understands all the concepts that you do.

Because, of course, someone who is borrowing $200,000 can't expect to be bothered to spend 5 minutes on Google looking stuff up. Actually, I timed it and it took me 22 seconds to find 3 good articles describing the benefits and drawbacks of an ARM.

Strangely, when I've bought property, the conversation hasn't been:

Agent: Have you considered an ARM?
Me: No, I'm interested in 10 or 20 year fixed only.
Agent: An ARM may be beneficial if you don't plan to stay more than 5 years.
Me: I don't know, can you tell me more.
Agent: NO AND YOU MUST TELL ME IN THE NEXT 10 SECONDS IF YOU WANT TO GO WITH AN ARM OR A FIXED-RATE MORTGAGE AND IF YOU DO NOT DECIDE, I'M GOING TO TELL EQUIFAX THAT YOU'RE A THIEF AND SEND YOU STRAIGHT TO THE WELLS FARGO TORTURE SODOMY DUNGEON.

I've got as much sympathy for someone who agrees to an ARM without any kind of research as I do for someone who buys a pizza and is shocked that it contains dairy products. I'm not talking even about getting a lawyer - if you can't be bothered spending a few minutes to learn the basics of the largest financial transaction you will make in your 80 years of existence, you get exactly what you deserve. If anything, I have more sympathy for society, that may in the future contain genetic material from someone so ghastly irresponsible and lazy - I don't have kids, but if I do, it's frightening that they could someday mate with someone who can't be bothered to spend 1/4 of the time on a financial transaction that they will be paying for decades that it takes to rub one out on a Thursday afternoon.

(And to Andy: as a lawyer I would absolutely never bury anything important in the "fine print." Yes, I understand that this is done in various legal settings. But the "A" for "adjustable" is right there in the freaking acronym.)

You are a patent lawyer right?

I have no doubt that when a patent lawyer drafts something it is precise, non-ambiguous, and understood by the intended audience.
When financial industry lawyers draft stuff, oftentimes it is not precise, deliberately ambiguous*, and far too often, intended to confuse or mislead the intended audience.

*The deal must close, if one side objects to sub-clause 3c, and the other side objects to how the first side wants to re-write it, well 3c goes... If the situation that 3c was intended to cope with later crops up????

Agent: Have you considered an ARM?
Me: No,
***
Agent: NO AND YOU MUST TELL ME IN THE NEXT 10 SECONDS IF YOU WANT TO GO WITH AN ARM OR A FIXED-RATE MORTGAGE AND IF YOU DO NOT DECIDE, I'M GOING TO TELL EQUIFAX THAT YOU'RE A THIEF AND SEND YOU STRAIGHT TO THE COUNTRYWIDE TORTURE SODOMY DUNGEON.

Anyone smart enough to cross the street on a green light is smart enough to understand that an ARM might go up and to ask someone who understands -- not the lender (WTF?) -- whether the mortgage makes sense given that person's particular finances/employment situation.

As others have said, you are overestimating the due diligence people put into their decisions. I don't think it's intelligence as much as it is a combination of wanting what they want now, and an unhealthy level of trust in 'the system' (if I wasn't supposed to be doing this, they'd tell me, right? They checked my credit score and bank statements and I qualify, everything checks out, so what could go wrong?)

As others have said, you are overestimating the due diligence people put into their decisions.

Yes, people are stupid and do irresponsible things. None of my business. Actual fraud is a different matter. But if you can't be bothered to give a #### about how borrowing a quarter of a million dollars works, nobody else should.

Ray, not to pile on, but you are seriously, seriously overestimating the intelligence of the average American.

Anyone smart enough to cross the street on a green light is smart enough to understand that an ARM might go up and to ask someone who understands -- not the lender (WTF?) -- whether the mortgage makes sense given that person's particular finances/employment situation.

Ray, like love, there's no such thing as "intelligence". There's only evidence of it. And the evidence to date clearly indicates that the intelligence to perform the step-by-steps you rightly advocate simply wasn't there for millions of people, not all of whom were merely "greedy".

All the ins and outs of the contract and of ARMS, all the "fine print," need not be understood. Just the basic concept. "Here are my finances; does the mortgage make sense?"

That's great, so long as the lender doesn't have perverse incentives for telling you "yes" when the answer should be "no".

My wife and I had a meeting with our financial adviser yesterday, and in the course of reviewing our portfolio, he mentioned that during the depths of the 2008/09 crash, he was flooded with calls from people wanting to dump everything. His reply was that in that case they should take their business elsewhere, because only a fool would sell stocks in a moment of panic when the market had lost half of its value in a matter of a few months.

If all lenders had the same sort of approach to prospective lendees that our financial adviser had to his clients, a lot of these human tragedies might well have been avoided.

I have no doubt that when a patent lawyer drafts something it is precise, non-ambiguous, and understood by the intended audience.

Well, that's the goal, but about 1/3 of all patent applications that are filed see their claims rejected under 35 USC 112, second paragraph, as being vague and indefinite. (Though these rejections are typically easy to overcome.)

More to the point, though, when drafting various agreements (e.g., NDAs), I will simply never "bury" anything in "fine print."

I don't think it's intelligence as much as it is a combination of wanting what they want now, and an unhealthy level of trust in 'the system' (if I wasn't supposed to be doing this, they'd tell me, right? They checked my credit score and bank statements and I qualify, everything checks out, so what could go wrong?)

This. Skepticism is not a universal trait, even among people with allegedly high IQs, especially when every media outlet is starving any skeptical instincts with all their feelgood stories about the economy.

I've got as much sympathy for someone who agrees to an ARM without any kind of research as I do for

Did I say that I had sympathy for these people?

No, what I was disputing was the apparent belief that these people are rare.
I have sympathy for me and other financially responsible people- the problem as I see it, is that such stupid people will take the whole damn economy down with them- if they are given unfettered freedom to act on their stupidity- which they were during the run up to this crisis.

One person makes a bad decision, boohoo, suck it up, 10 million make a bad decision, we all get ######, even those who were responsible.

A. We had borrowers who should not have been borrowing money

B. We had brokers who should have been telling these people "no" who said "yes" instead, because they get paid to say "yes" and face no downside if they say "yes"

C. We had loan orginators who should have been saying "no", because while they get paid to say "yes" also face downside if yes turns out to be the wrong answer, - but no longer faced that downside because of the ease and ability to sell loans off.

D. We had government regulators who either were stripped of their tools to do anything, or were negligent ion applying the ones they had.

and what really drives we nuts is that you have people who will insist to high heaven that the "problem" is A., and some other people will insist it is C., and some will say no, it's D.

People are horrible at properly understanding medium and long term risk and probability in general. I thought that would be common knowledge among primates here. In terms of evolution understanding probability and long term risks was largely meaningless and perhaps even detrimental.

When you have entire industry built around getting a person to sign on the dotted line you're going to get crazy things happening. It isn't that people didn't understand what an ARM* was it was that people simply didn't understand the risks involved.

You know what State Government did a good job on this score?
Texas
Do you know why? Because they tightly regulated the home mortgage market
Lenders could not lend more than 80% of a home's value, based upon an independent state licensed appraisal (they couldn't even use in-house appraisers)
ARMs were not allowed, "teaser rates and neg-Am" loans were not allowed
as a result no RE bubble and no crash, but they did it by severely limiting the right to contract so beloved by libertarians

And by the way, those rules were in place for decades, Rick Perry tired to do away with them but fortunately for Texas home owners he failed.

OTOH Texas is the easiest state to complete a foreclosure from the bank's POV,

My understanding is the same -- Texas was actually insulated because Texas law basically 'protected' everyone from playing risky games... My understanding is/was that this was due to some speculative bubbles way back in Texas' past -- even while everyone else was getting rich with funny money, Texas decided to stick with its nanny state :-)

Agent: Have you considered an ARM?
Me: No, I'm interested in 10 or 20 year fixed only.
Agent: An ARM may be beneficial if you don't plan to stay more than 5 years.
Me: I don't know, can you tell me more.
Agent: NO AND YOU MUST TELL ME IN THE NEXT 10 SECONDS IF YOU WANT TO GO WITH AN ARM OR A FIXED-RATE MORTGAGE AND IF YOU DO NOT DECIDE, I'M GOING TO TELL EQUIFAX THAT YOU'RE A THIEF AND SEND YOU STRAIGHT TO THE WELLS FARGO TORTURE SODOMY DUNGEON.

That is indeed strange that the conversation hasn't proceeded that way. To listen to people here, the only thing missing was the threat from the agent that he was going to rape your wife and sell your children into the sex slave industry if you didn't sign.

As others have said, you are overestimating the due diligence people put into their decisions.

My point has been that people were smart enough to get a rational answer one way or the other, even with all the Deceptive Ads and Evil Lenders coming at them as if this were Space Invaders. That they didn't - these are major financial decisions, not deciding whether to eat in or go to Serafina - is something I shouldn't have to pick up the tab for.

The deal is - from my perspective - that when you have a system that allows stupid behavior by individuals to such a large extent that it crashes the economy then thereis a problem. It is not the individuals that I have concern for (well I do, but not much in this context), but the whole economy.

Government is suppossed to (from my perspective) stop such aggregated individual behavior from crashing the economy to the extent it is possible. So the question is not did stupid people do stupid things (that answer is yes), the question is why did the system allow that behavior to nearly crash the economy? And that is where the government regulations need to be looked at to prevent that from happening in the future.

That is indeed strange that the conversation hasn't proceeded that way.

Those conversations happen, not all the time, but they happened, what also happened was:

at closing:

Borrower: Hey, what is this? It say ARM, I wanted 30 years fixed.

Bank Atty: Let me see that, oh the bank sent over the wrong papers, well sign it anyway, we'll fix it later

Borrower: No, fix it now.

Bank Atty: Can't, we'll have to adjourn

Seller: Hey, if we're not closing I'm putting the house back on the market, we went to contract 3 months ago, do you know what my neighbor just got?

Bank Atty: If we adjourn I can't guarantee you that your commitment won't expire either, look sign today, we'll do an amendment next week, if we don't close today your seller may walk, the market's going up you won't get a deal like this again.

Is this kind of story universal? Of course not, but it happened a lot.

My point has been that people were smart enough to get a rational answer one way or the other, even with all the Deceptive Ads and Evil Lenders coming at them as if this were Space Invaders. That they didn't is something I shouldn't have to pick up the tab for.

But that's not what "you picked up the tab for".... you picked up the tab for the banks who were losing their ass and threatening to blow up the financial world.

You didn't pick up the tab for any of these dastardly homeowners... you picked up the tab for the investment banks, hedge funds, banks, insurance giants, etc that had placed big bets on top of the bundles.

But that's not what "you picked up the tab for".... you picked up the tab for the banks who were losing their ass and threatening to blow up the financial world.

You didn't pick up the tab for any of these dastardly homeowners... you picked up the tab for the investment banks, hedge funds, banks, insurance giants, etc that had placed big bets on top of the bundles.

Those conversations happen, not all the time, but they happened, what also happened was:

at closing:

Borrower: Hey, what is this? It say ARM, I wanted 30 years fixed.

Bank Atty: Let me see that, oh the bank sent over the wrong papers, well sign it anyway, we'll fix it later

Borrower: No, fix it now.

Bank Atty: Can't, we'll have to adjourn

Seller: Hey, if we're not closing I'm putting the house back on the market, we went to contract 3 months ago, do you know what my neighbor just got?

Bank Atty: If we adjourn I can't guarantee you that your commitment won't expire either, look sign today, we'll do an amendment next week, if we don't close today your seller may walk, the market's going up you won't get a deal like this again.

Is this kind of story universal? Of course not, but it happened a lot.

If you're a borrower, you say fine, give me back my deposit and I'll take my business elsewhere. I really have no sympathy for someone who would fall for that. No one has to buy a house today.

It the borrower was flat out lied to about the loan terms, sure I have sympathy. But if you can be bullied that easily, that's on you.

Ray, stupid people typically have stupid friends and stupid relatives. Also, they have poor judgment when it comes to finding smart people and/or determining which ones to trust. Because they're stupid and they do stupid things. That's what being stupid is all about.

But that's not what "you picked up the tab for".... you picked up the tab for the banks who were losing their ass and threatening to blow up the financial world.

You didn't pick up the tab for any of these dastardly homeowners... you picked up the tab for the investment banks, hedge funds, banks, insurance giants, etc that had placed big bets on top of the bundles

This is simply false, Zonk. Or, in other words, it's just as true as your laughable claim that Al Gore hasn't really made anything from his various business interests, and his wealth has come solely from his daddy being rich just like Bush's daddy, don'tchaknow. I'm still waiting for you to provide the data from your research that refutes Forbes's information.

Those conversations happen, not all the time, but they happened, what also happened was:

at closing:

Borrower: Hey, what is this? It say ARM, I wanted 30 years fixed.

Bank Atty: Let me see that, oh the bank sent over the wrong papers, well sign it anyway, we'll fix it later

Borrower: No, fix it now.

Bank Atty: Can't, we'll have to adjourn

Seller: Hey, if we're not closing I'm putting the house back on the market, we went to contract 3 months ago, do you know what my neighbor just got?

Bank Atty: If we adjourn I can't guarantee you that your commitment won't expire either, look sign today, we'll do an amendment next week, if we don't close today your seller may walk, the market's going up you won't get a deal like this again.

Is this kind of story universal? Of course not, but it happened a lot.

This is an entirely different issue, one bordering on fraud, not one in which a borrower couldn't be bothered to understand ahead of time in a six figures transaction what an ARM is.

Yes, you did. Through HAMP, HAFA and other programs where the government is paying lenders to modify loans to reduce or fix interest and reduce principal. Whether it is good or bad policy, I'll let others debate but there should be no doubt that the bailouts included homeowners too. That ignores things such as HOBOR that legislatively dramatically extends the time to conduct a foreclosure and allows non-paying borrowers to remain in houses quite litterally for years (average NY foreclosure last year took over 900 days from date of last payment to date of sale) where the eventual burden is picked up by those of us actually paying our mortgages.

Let's try it this way: When I'm renting a tux for $150 I don't bother to read the contract, or the "fine print." It's a few hundred dollars; even if something goes wrong and I get screwed it won't break me.

But you're getting a mortgage for $150,000 and you can't be bothered to figure out the basics of it? Sorry, but I'm not sorry for you.

This is simply false, Zonk. Or, in other words, it's just as true as your laughable claim that Al Gore hasn't really made anything from his various business interests, and his wealth has come solely from his daddy being rich just like Bush's daddy, don'tchaknow. I'm still waiting for you to provide the data from your research that refutes Forbes's information.

I don't know what Forbes information you're talking about...

But here's the best list I've found of the various bailouts... What monies on this sheet went to homeowners (in foreclosure or otherwise)? I see 20 billion allocated to essentially do "new" loans... but the other trillions went to balance sheets.

I mean, it's like you want HAMP to be a failure in one case, but a very costly "success" in a different argument.

The money did not go to 'poor people'.... it went to the institutions that placed bets on top of bets on top of bets. Even the Fannie/Freddie bailouts- the money was going to a financing institution (and its shareholders), not to people who took out loans they couldn't afford.

In Suffolk there's a judge who gives lectures to foreclosure defense lawyers about how to defeat foreclosure actions...

but yes there are still judges who will rubber stamp anything the bank lawyers give them to sign, it has become a crap shoot, how long a foreclosure action lasts and whether it is even successful depends upon the assigned judge more-so than the merits of any particular case.

Yes, you did. Through HAMP, HAFA and other programs where the government is paying lenders to modify loans to reduce or fix interest and reduce principal. Whether it is good or bad policy, I'll let others debate but there should be no doubt that the bailouts included homeowners too. That ignores things such as HOBOR that legislatively dramatically extends the time to conduct a foreclosure and allows non-paying borrowers to remain in houses quite litterally for years (average NY foreclosure last year took over 900 days from date of last payment to date of sale) where the eventual burden is picked up by those of us actually paying our mortgages.

Pennies compared to what went to bank/insurance/market shoring up...

HAMP has famously been called a 'failure' because it only touched a limited number of mortgages... Has HAMP even topped 10 billion? 10 billion ain't nothing -- but it is pennies when you compare the actions taken to save AIG and the banks.

All the ins and outs of the contract and of ARMS, all the "fine print," need not be understood. Just the basic concept. "Here are my finances; does the mortgage make sense?"

That's great, so long as the lender doesn't have perverse incentives for telling you "yes" when the answer should be "no".

Sigh. Once more. If you didn't ask someone objective who wasn't sitting on the other side of the table with interests that don't align with yours, I have no sympathy for you.

Look, we bought in 1991 and now have a $900 monthly mortgage payment on a good sized 4 bedroom house on a large lot in a good neighborhood. I don't need any sympathy from anyone.

But as several others have mentioned time and again, the issue isn't whether or not individual borrowers were "stupid" and therefore not worthy of sympathy, but whether the entire system in place enabled that sort of stupidity (and greed) to go largely unchecked. It's a bit like saying that only stupid people spawn unwanted children, and pretending that that's the final answer to the problem.

Like all of us, I have friends who are the product of divorce. The ones who remain bitter about it, who blame their current lives the unhappiness of having to live through divorce, tell me that they would have preferred that their parents stay together.

I think they're wrong.

As someone well acquainted with divorce, I know they're wrong.

My parents were terribly unsuited for each other, and got divorced when I was pretty young. I have a strong relationship with both mom and dad and both are much happier and more balanced than they could ever be together. They are very friendly and work well together in social settings, because they ended the relationship before they grew to hate each other. My mother remarried and I lived with my mom and stepdad, with the example of pretty much the healthiest relationship I've ever seen.

This is in sharp contrast to my ex-wife's experience. Her parents stayed together far too long, and they absolutely hate each other (or at least they did the last time I saw them together).

Either way, it still screws you up. My ex-wife spent our whole marriage with one foot in and one foot out, because she was terrified of reliving her parents' situation. I was really unhappy but I'd have stayed forever because I thought that when you're married you have an obligation to tough it out no matter what. She did me a great favor by leaving.

In general, I believe people are smart, but they're smart in the actual thing they have and want to care about. When you're buying a house, you care about getting that house, and what you have to pay for it, not what ARM or fixed means or any techical details. Not to mention the intentional ofsucation that companies use to help extract more revenue from their customers.

The Senate beat back a Republican filibuster on gun legislation Thursday morning by a vote of 68-31, clearing the way for possible floor votes and giving the Obama administration and its allies a glimmer of hope.

... It appeared in recent weeks that GOP opponents, led by Rand Paul and Majority Leader Mitch McConnell, would keep any legislation off the floor. But President Obama stepped up the pressure, in part with an emotional speech in Connecticut this week after huddling with families who lost loved ones in the Newtown tragedy.

Vice President Biden continued the campaign Thursday morning on MSNBC’s Morning Joe, saying “the public is so far ahead of the electorate” on this issue.

The administration still supports a ban on assault weapons and high-capacity magazines, but those measures seem to be going nowhere on the Hill in the face of fierce NRA opposition.

In a new NBC/Wall Street Journal poll, 55 support stricter laws on the sale of firearms, down 6 percent from the survey taken after Obama made the issue a centerpiece of his State of the Union address. The partisan breakdown in the new poll could hardly be more stark, with 82 percent of Democrats favoring stricter laws and just 27 percent of Republicans.

But as several others have mentioned time and again, the issue isn't whether or not individual borrowers were "stupid" and therefore not worthy of sympathy, but whether the entire system in place enabled that sort of stupidity (and greed) to go largely unchecked

The "I don't have sympathy for them" flows from the absurd comments by people here excusing them for not bothering to understand the basics of the six-figures deals they were entering into. "They were duped; they're too stupid; they don't have smart friends; they were fooled by deceptive ads!!!!!!!" Those are sympathy-based arguments.

As is this argument, Andy, which you made in post 1884:

"Greedy" wanna-be home owners, eh? Or just people who wanted to own the home (or apartment) they lived in, and were afraid that they'd better buy before the prices went up even more. The American Dream has always entailed home ownership, and marginally qualified home seekers aren't the equivalent of Gordon Gekko, no matter how much you want to demonize them.

But you're getting a mortgage for $150,000 and you can't be bothered to figure out the basics of it? Sorry, but I'm not sorry for you.

When someone like that doesn't pay their bills and loses their house, then I'm not sorry for them — but that just affects that particular person and their family. When someone like that doesn't pay their bills and it threatens to break the national economy then I'm gonna have questions.

Libs are just stuck on the lowest level of the subprime crisis. People have defaulted on loans since forever. The question this time is, "How did that manage to nearly wreck the economy?" because it wasn't a bunch of poor dumb folks who overleveraged Lehman Brothers, AIG, Merrill, and nearly every other large financial institution by a few hundred percent. When that one idiot loses their home, thousands don't lose their jobs and millions of people don't lose their savings. That is the issue, not the one guy you're stuck on. Did the people who ran those companies not read the fine print? Were they just lazy? Uneducated? Dumb?

The "I don't have sympathy for them" flows from the absurd comments by p

No, your "I don't have sympathy for them argument" flows from you seeking a graceful exit from your absurd argument that such people either didn't exist or are too rare to worry about.

I really don't have sympathy for most of these people either (absent actual fraud), but I don't want the fact that most of these people do not merit sympathy on an individual level to distract from the need to prevent them and the people who want to exploit them from wrecking the whole damn economy.

Precisely, but they don't want to address that, they want to fall back on personal responsibility as away of changing the subject, because the fact that people don't always act as rational economic actors- that a good number of people are not really capable of acting as rational economic actors has always been a big monkey wrench in Libertarian and Univ. Chicago style economic philosophy- one they can't really effectively address so they either minimize the overall impact, and when that's not possible change the subject, and say "I have no sympathy for X, X shouldn't have done that, it's X's own damn fault"

Do you know why? Because they tightly regulated the home mortgage market
Lenders could not lend more than 80% of a home's value, based upon an independent state licensed appraisal (they couldn't even use in-house appraisers)
ARMs were not allowed, "teaser rates and neg-Am" loans were not allowed
as a result no RE bubble and no crash, but they did it by severely limiting the right to contract so beloved by libertarians

Yes -- this is how things used to be and what they should go back to being. People aren't in fact capable of sensibly understanding and choosing between a variety of investment and financial products. We have to go back to dumbing those things down.

The idea that they should set up their own IRAs and 401Ks and that should be their retirement is also going to blow up in the next 10-20 years. You'll find a ton of people now in their 40s who didn't donate much, made stupid investments, or withdrew their money for current expenditures and there will be a big cry of "We have to do something for these people so they can retire." The justification will be that they had to pull out money because of the high unemployment and poor economy that started in 2008, but that will just be a fig leaf explanation.

I mean, yeah, it sucks that people are so ill-educated and so focused and obsessed on the ####### Kardashians and their ####### entertainment and their giant platters of food that they aren't able to function in anything more sophisticated than a 1940s financial system, but it is what it is.

When that one idiot loses their home, thousands don't lose their jobs and millions of people don't lose their savings. That is the issue, not the one guy you're stuck on. Did the people who ran those companies not read the fine print? Were they just lazy? Uneducated? Dumb?

There was an article from the Finincial Times months after the aftermath of the crisis argued just that. Lehman Brothers developed an argorithym that made money on virtually any Credit Default Swap deal that they did, but they didn't bother to test for a massive 'course correction.' Richard Fuld claimed he just approved everything without understanding how it worked, and was told "It just makes us money."

If the CEO is that igorant of how his business works, you can understand why people who do not have to take a crappier mortage can be convinced to as well.

There was an article from the Finincial Times months after the aftermath of the crisis argued just that. Lehman Brothers developed an argorithym that made money on virtually any Credit Default Swap deal that they did, but they didn't bother to test for a massive 'course correction.' Richard Fuld claimed he just approved everything without understanding how it worked, and was told "It just makes us money."

If the CEO is that igorant of how his business works, you can understand why people who do not have to take a crappier mortage can be convinced to as well.

Why are you sure he's not lying?

He may well have understood it perfectly. 99 out of 100 time we make money, and the 100th time the Feds will bail us out.

This moral hazard is endemic when you pay bonuses as a % of profits a trader or manager generates.

If I can make a bet that 9 out of 10 times will generate $250M in profits (of which I get 10%), and the 10th time lose $10B, and bankrupts the bank of fund, any trader will take that bet all day long, even though the expected value is hugely negative.

There was an article from the Finincial Times months after the aftermath of the crisis argued just that. Lehman Brothers developed an argorithym that made money on virtually any Credit Default Swap deal that they did, but they didn't bother to test for a massive 'course correction.' Richard Fuld claimed he just approved everything without understanding how it worked, and was told "It just makes us money."

I remember when it came out that financial institutions were using supercomputers to put together the CDOs, and it was impossible for anyone who wasn't a supercomputer to know what any tranche within each was comprised of.

What's easy to understand, though, is this: there was a massive financial motivation for lending bodies to create as much debt as possible so they could securitize them. That goes a long way towards explaining why so many people who probably shouldn't have gotten loans got them.

One can choose whether or not to dole out one's sympathy to individual borrowers. I obviously have more sympathy for more of them than you do, and I also assign much more blame to lenders who solicited and approved contracts that they should have known would never be honored in the long run, short of a neverending upward spiral in prices.

But (again) as others have pointed out repeatedly, whether or not this sympathy is misplaced is irrelevant, when an entire economy's health is threatened by the fallout of the bursting of that bubble. You can't simply offer "people should be smarter" as the final word in crisis prevention of a housing bubble, any more than "just say no" is a serious answer to unwanted pregnancies. This was a systemic breakdown that requires a more comprehensive solution.

What's easy to understand, though, is this: there was a massive financial motivation for lending bodies to create as much debt as possible so they could securitize them. That goes a long way towards explaining why so many people who probably shouldn't have gotten loans got them.

But (again) as others have pointed out repeatedly, whether or not this sympathy is misplaced is irrelevant, when an entire economy's health is threatened by the fallout of the bursting of that bubble. You can't simply offer "people should be smarter" as the final word in crisis prevention of a housing bubble,

I didn't offer that as the final word on anything. I specifically said that government altered the incentives of the parties, and the fact that, as you say right above, "an entire ecomony's health is threatened" means that it didn't take a genius to figure out that government would have taxpayers bail out in advance of a meltdown.

any more than "just say no" is a serious answer to unwanted pregnancies. This was a systemic breakdown that requires a more comprehensive solution.

One can choose whether or not to dole out one's sympathy to individual borrowers. I obviously have more sympathy for more of them than you do, and I also assign much more blame to lenders who solicited and approved contracts that they should have known would never be honored in the long run, short of a neverending upward spiral in prices.

How did they actually suffer? In the worst carppy loans, downpayments were virtually zero.

The borrowers got to make an effectively free bet that housing prices would continue to rise, and many of them took out cash in multiple refinancings before the bubble burst.

Even if you took out no cash, the borrowers got to live in houses they couldn't afford, paying below market "rent" b/c of IO loans, and they when they defaulted, got to live rent free for 6-12 months before being evicted.

Yes, in large part because government suggested that current lending practices were racist and then monkeyed with the financial incentives of the parties involved.

This is a completely wrong statement. The government forced banks to follow the rules consistently. When they did not there were lawsuits. They were not forced to behave in an illegal manner. They did and paid the price. But, even if the lawsuits had never existed the same result would have taken place.

Yes, in large part because government suggested that current lending practices were racist and then monkeyed with the financial incentives of the parties involved.

"In large part"? Ray is claiming that simply making a lot of money with no apparent risk wasn't incentive enough for people to make bad loans. Ray is also claiming that government-enforced race policing is the reason why Lehman Brothers is not with us today.

I heard that lenders hypnotized people into signing.

They were lending money for very little interest for the first few years, enough time for the property to appreciate and be flipped for a tidy profit. (That's exactly how my folks, both realtors, built their retirement fun.) If you were poor, that loan would be a risk you'd be happy to take.

It's so weird, the way America's supply of stupid people suddenly shot up immediately following the repeal of Glass-Steagal, and at the exact same time that the total amount of outstanding unregulated credit default swaps was increasing by more than 10,000% in less than ten years.

One problem is the people who suffered (other than the general txpayers) are those that truly believed it when they were told real estate prices would only go up, and then stuck (and largely continue sticking) with it even when they were underwater and basically hosed. Of course changes to bankruptcy laws favoring creditors might have soemthign to do with people not being able to bail as easily as some people think that could have.

But (again) as others have pointed out repeatedly, whether or not this sympathy is misplaced is irrelevant, when an entire economy's health is threatened by the fallout of the bursting of that bubble. You can't simply offer "people should be smarter" as the final word in crisis prevention of a housing bubble, any more than "just say no" is a serious answer to unwanted pregnancies. This was a systemic breakdown that requires a more comprehensive solution.

I don't have any sympathy for them.(*) My sympathy goes more toward myself, since I'm always the one who has to bail them out of their stupid ####### decisions and incompetence.

(*) Other than in the generic sense that society is set up to tempt and seduce them into consumerist envy and general adoption of the ethos of consumerism. I'm generally sympathetic that so many people have little more going for them than what they consume.

If the CEO is that igorant of how his business works, you can understand why people who do not have to take a crappier mortage can be convinced to as well.

Why are you sure he's not lying?

I would say because he's actually NOT ignorant about how his business works -- he understood it quite well... His business is wholly and solely to make money. Lehman did not make widgets, they did not sell services (in the direct to consumer sense).... Their business was to make money.... and he did... until the golden goose of sand castles washed away.

"In large part"? Ray is claiming that simply making a lot of money with no apparent risk wasn't incentive enough for people to make bad loans. Ray is also claiming that government-enforced race policing is the reason why Lehman Brothers is not with us today.

The Raybot has a bad kernel somewhere because yeah.... this is just.... bizarre.

I would say because he's actually NOT ignorant about how his business works -- he understood it quite well...

Most CEOs don't know all the details of their business, how could they? Knowing the details of how a jet engine works, the electrical grid, CPUs, and so on is pretty unlikely for the various CEOs of campanies that do such things. Obviously the CEO has better understand the industry (and even there one can find instances).

I don't have any sympathy for them.(*) My sympathy goes more toward myself, since I'm always the one who has to bail them out of their stupid ####### decisions and incompetence.

You are history's greatest monster, for thinking that those of us who were not in government and not a party in any of these ###### up transactions deserve anyone's sympathy for being forced to write checks to cover them.

----------

For the record, I was not supportive of any bailouts to anyone or any entity, be it private, governmental, or quasi-governmental.

what do people think about how we subsidize house purchases through tax policy? (i'm against it)

Anti in theory.... lukewarm in practice....

Home construction (and home upkeep) is one of the few blue collar professions that can't be offshored, so from a broader economic policy perspective -- I suppose juicing the incentives to buying a home isn't a bad thing.... and I say this as a lifelong renter.

It is telling that the Libertarian thinks the problem was too much government interference and the Liberals think the problem was too little.

There was too much government interference in policies that sought to encourage loans to lower income people (in many cases minorities) who couldn't afford them.
There was too little government interference in the repeal of Glass-Steagall.

As is the case in many situations, it's not black or white, it's grey.

It's so weird, the way America's supply of stupid people suddenly shot up immediately following the repeal of Glass-Steagal, and at the exact same time that the total amount of outstanding unregulated credit default swaps was increasing by more than 10,000% in less than ten years.

It must have been all that government-subsidized medical marijuana that caused that sudden outbreak of stupidity, because otherwise it's a sheer coincidence.

even while everyone else was getting rich with funny money, Texas decided to stick with its nanny state :-)

There is a core of libertarianism at the heart of the Texan nanny state, oddly if predictably enough. Texas has strong homestead laws that certainly do regulate real estate behavior, but in the interests of preserving the ideal of a little lot of land and your home as your castle. 25 years ago, you couldn't even get a home equity loan; you could only have a single primary mortgage on your property. (Home equity loans are now legal but still strongly regulated here, as several have noted.) And that indeed limits your freedom, but the intent (and frequent effect) was to limit the freedom of others to play fast and loose with the roof over your head.

what do people think about how we subsidize house purchases through tax policy?

As oppossed to what? Phasing it out tomorrow? Never having done it? Other tax policies around where people live?

Housing is regulated by zoning, building codes, tax policy in many ways (not just the mortgage deductions), and so on. There is renting vs. leasing vs. owning; single family versus multiple family buildings and again so on. It is also much more than federal, with state, country, and city stuff.

The idea that ownership of homes encourages the sort of behavior governments want to encourage seems reasonable, but I am not sure it applies anymore. Where we are now with house size growing ever larger and an emphasis on single family homes in the suburbs seems like a poor fit for where the modern world is (should be) heading, but how to fix it is a tricky question.

The daughter of the Rev. Jeremiah Wright — the controversial former pastor to President Barack Obama — was indicted today in an expanding federal probe of a state grant tied to a former suburban police chief.

Jeri Wright of Hazel Crest is accused of helping former Country Club Hills Police Chief Regina Evans convert fake paychecks from Evans’ nonprofit to Evans’ personal use, allegedly hiding money that was supposed to be used to train minority and female workers in the building trades.

For the record, I was not supportive of any bailouts to anyone or any entity, be it private, governmental, or quasi-governmental.

In the real world, when an entity that holds tens of billions of other people's money goes down, even innocent people suffer. Let Merrill, AIG, and everyone else burn? Oh, sure, trillions of dollars will be lost, millions of people will be thrown into poverty, but dammit, at least the government stayed out of it! Only a libertarian who lives in a glass Internet house can look at a situation like that and say that the loss of home and security for millions is a good thing.

In the real world, when an entity that holds tens of billions of other people's money goes down, even innocent people suffer. Let Merrill, AIG, and everyone else burn? Oh, sure, trillions of dollars will be lost, millions of people will be thrown into poverty, but dammit, at least the government stayed out of it! Only a libertarian who lives in a glass Internet house can look at a situation like that and say that the loss of home and security for millions is a good thing.

You're assuming the conclusion. It's not clear at all that would have happened.

But I'm glad to see you're suddenly concerned that innocent people might lose their money. Another word for this is "taxes."

I was clear to anyone with any knowledge about what was going on, which you have demonstrated in this thread that you have none.

Yes, in large part because government suggested that current lending practices were racist and then monkeyed with the financial incentives of the parties involved.

This is just as false now as when JoeK brought it up earlier in this thread and it was torn to shreds. This gets brought up even though it at worst contributed only some minuscule fraction to the overall situation, its desperately relied upon by libertarian types who can't face the fact that this was almost pure MARKET failure.

The daughter of the Rev. Jeremiah Wright — the controversial former pastor to President Barack Obama — was indicted today in an expanding federal probe of a state grant tied to a former suburban police chief.

As opposed to what? Phasing it out tomorrow? Never having done it? Other tax policies around where people live?

Whatevs you like (I was thinking going forward) - just prompting conversation. I think it's pretty lousy policy, but as the most famous middle class tax break, it ain't going anywhere any time soon. I'd like a slow phase-out myself...